Best Way To Deal With A Large Drawdown

[Fundlord]

Since you are trading manually - if your trading judgement had not been impaired the best thing to do would be to continue as is.

There are several issues with reducing size. Sure, it's natural because you start to think in terms of capital preservation. But it also reinforces the feeling of there being a long road ahead to get back to your high water mark. If you aren't careful, that will affect your judgement.

Your biggest asset manually trading is your intuition. A lot of effort needs to go into protecting that and isolating it from all the emotions that get in the way. Don't dwell on drawdowns, don't dwell on win/ loss rates. Trade value rather than price. As you get better at this your drawdowns will disappear and 2-3 consecutive loosing days should become rare. Maybe 3-4 times a year. This is also the problem I have when using charts - they tend to impair your intuition and make you see patterns that have no meaning.

Maybe you should find / socialize with manual traders who work for established, profitable companies. It's hard to get a sense of sense of what is possible and what is standard when / if you are trying to do it all solo.

I tried trading without charts by just looking at the bid/ask and seeing which way was the path of least resistance but I was trading 50X leverage to get a decent return on 5-10 pip moves. It was real edge of the seat stuff, I made money but any quick adverse move and I would have been like a deer caught in the headlights.

The nearest trading firm is about 200 miles from me and I don't know any other traders.

 

[Fundlord]

FEEL!!!

That is your issue, how you feel has either changed or the way the market is acting has changed, so same feeling different result.

Your also trading US Open time / News on a Monday, madness is to be expected, it's going to spike both ways, has the time you trade changed ??

I only trade in slow momentum where it's say creeping up/down, no where near news or a market opening.

I rarely trade around news announcements but yeah I normally trade the asian/australian session and UK/US session.

I think the only thing at this point to get me out of this hole is a number of asymmetrical trades, where the payoff is at least 3 times the risk.

 

[Fundlord]

FEEL!!!

That is your issue, how you feel has either changed or the way the market is acting has changed, so same feeling different result.

Your also trading US Open time / News on a Monday, madness is to be expected, it's going to spike both ways, has the time you trade changed ??

I only trade in slow momentum where it's say creeping up/down, no where near news or a market opening.

What kind of timeframe do you trade when trying to catch those slow moves ?

When I look at my hour candles during a slow moving market it just looks flat so I don't bother.

But If I look at it with 5 minute charts you can see the movement more clearly.

 

[globalarbtrader]

Total drawdown has reached 33%, this thread will mark my demise or comeback.

It wouldn't be the size of the drawdown that bothered me now, but the speed you are losing money. This suggests you have very high risk (much scarier than a high drawdown). How does your loss over the last week compare with back-test, expectation or your experience since you started?

 

[Fundlord]

It wouldn't be the size of the drawdown that bothered me now, but the speed you are losing money. This suggests you have very high risk (much scarier than a high drawdown). How does your loss over the last week compare with back-test, expectation or your experience since you started?

I have never experienced a double digit drawdown prior to this.

I think I found the issue though, I was listening to noise around me like shorting aud after interest rate cut and going long ASX200 which were my biggest losing trades. I ignored the price and traded like some pure fundamentalist.

I need to ignore those saying I can't trade short term because that is all thats working for me now and I have to follow reality.

I went back to my short term strategy and ditched my swing trading for now and have recovered a few % today off the back of some short term trades on FX.

I think thats the game plan just make it back slowly over a number of asymmetrical trades.

 

[newwurldmn]

Since you are trading manually - if your trading judgement had not been impaired the best thing to do would be to continue as is.

There are several issues with reducing size. Sure, it's natural because you start to think in terms of capital preservation. But it also reinforces the feeling of there being a long road ahead to get back to your high water mark. If you aren't careful, that will affect your judgement.

Your biggest asset manually trading is your intuition. A lot of effort needs to go into protecting that and isolating it from all the emotions that get in the way. Don't dwell on drawdowns, don't dwell on win/ loss rates. Trade value rather than price. As you get better at this your drawdowns will disappear and 2-3 consecutive loosing days should become rare. Maybe 3-4 times a year. This is also the problem I have when using charts - they tend to impair your intuition and make you see patterns that have no meaning.

Maybe you should find / socialize with manual traders who work for established, profitable companies. It's hard to get a sense of sense of what is possible and what is standard when / if you are trying to do it all solo.

I agree with this, but I think you should cut your size at least temporarily. As a manual trader, my experience has been that losses are generally auto-correlated and you will probably continue to lose money. Take a step back, see what happened and jump back in when your head is cleared. I've done this 3 times in the last 2 years. Each time, I do, my stress level drops and I can see what I need to do next (sometimes it was restart and not change anything, last time, I changed my strategy a bit).

It's hard to get perspective when you are managing the details of your book and your book is constantly changing on a daily, hourly, or minute-by-minute basis.

 

[SwingToWin]

18% is not a bad drawdown...that may even be a normal daily deviation for some people.
If you have 30,50,70,90%+ updays...then that's no biggie.

in your dreams

---

nothing bad about a solid intuition and a proper feeling for the market.

 

[Arnie]

It was over a 30 or so trades losing 20 trades at 2 percent each and winning 10 at 1-2 percent each. Usually my win rate is much higher, i took profits way to early in all the trades and cut losses way too early. Further reducing my win rate.

The drawdown was inevitable, wasn't it?

Sometimes, you just need to get your head out of the mixer.

 

[trickshot]

I have never experienced a double digit drawdown prior to this.

I think I found the issue though, I was listening to noise around me like shorting aud after interest rate cut and going long ASX200 which were my biggest losing trades. I ignored the price and traded like some pure fundamentalist.

I need to ignore those saying I can't trade short term because that is all thats working for me now and I have to follow reality.

I went back to my short term strategy and ditched my swing trading for now and have recovered a few % today off the back of some short term trades on FX.

I think thats the game plan just make it back slowly over a number of asymmetrical trades.

You can't swing trade, not with that kind of leverage, and I know you must be taking on a massive amount of leverage because the ASX didn't really move that much today, only 1ish%, that shouldn't have caused anyone to lose 5% of his account unless he was heavily leveraged.

If you think trading for 5-10 pips with very high leverage is the only way you can make money then continue to do it, whatever works for you.

 

[luisHK]

I didn't read the whole thread so not sure wether you mean 18% of your trading account, your liquid net worth or your net worth.
If the first case I can relate as I swing trade manually a volatile strategy and I saw my account go down this kind of percentage already a couple of times (possibly more than a couple ).
It hurt every time financially and psychologically but have been fortunate enough to get back to positive in few weeks or months.
Usually I reduce size enough to use a similar margin percentage of the account, but also add funds if I feel the positions are not big enough.
Anyway good luck, drawdowns are tough times to go through.